Forex Glossary

A

An Abandoned Baby is a Japanese candlestick pattern signalling a possible reversal. It consists of three candles. In a downtrend, a long red candle is followed by a Doji that gaps lower. The third candle has a long green body and gaps above the Doji's high.

Actionary Waves Theory is a method of market analysis that is based on the idea that the market forms the same types of patterns on a smaller timeframe that it does on a longer timeframe and that these patterns provide clues as to what might happen next in the market.

An Affiliate is a member of the BDSwiss' Partners' program. BDSwiss' Affiliates use their own online resources (websites, social media) to direct traffic to BDSwiss and receive a compensation for successful referrals.

A technical Indicator designed by Dr. Bill Williams. It consists of 3 moving average lines: The Alligator's Jaw (blue line) is a 13-period Smoothed Moving Average shifted into the future, by 8 bars. The Alligator's Teeth (red line) is an 8-period Smoothed Moving Average shifted into the future by 5 bars. The Alligator's Lips (green line) is a 5-period Smoothed Moving Average shifted into the future by 3 bars.

The word "altcoin" is an abbreviation of "Bitcoin alternative," and thus describes every single cryptocurrency except for Bitcoin. Altcoins aim to replace or improve upon at least one Bitcoin component. The term has stuck among cryptocurrency traders and is still used to refer to lower cap cryptocurrencies.

The Average True Range is an indicator developed by Welles Wilder to measure volatility. Wilder believed that high ATR readings occur at bottoms after a strong downtrend characterized by "panic" sell-off. Low ATR readings are usually found at tops and during periods of consolidation.

A decentralized digital currency used for peer-to-peer transactions. It was introduced in 2009 by a programmer using the name Satoshi Nakamoto. The number of bitcoins in circulation cannot exceed 21 million.

A technical indicator developed by John Bollinger. The upper band is drawn 2 standard deviations above a simple moving average and the lower band 2 standard deviations below the simple moving average. Bollinger Bands measure volatility and display price extremes.

A five-candle bearish reversal formation. The first candle has a long green body trading in the direction of the uptrend, showing the bulls' strength. The second candle is also green, and of a regular size gaping above-reaffirming the upward move. The third and fourth candles have green bodies of regular size, higher than the previous close. Finally, a long red body is formed that closes in the gap created by the first two candlesticks.

A five-candle bullish reversal formation. The first candle has a long red body trading in the direction of the decline, showing off the bears' strength. The second candle is also red, and of a regular size gaping below-reaffirming the downward move. The third and fourth candles have red bodies of regular size, closing lower than the previous close. Finally, a long green body is formed that closes in the gap created by the first two candlesticks.

C

Cable is a slang term used among forex traders referring to the exchange rate between the U.S. dollar and the British pound sterling. This term supposedly derives from the advent of the telegraph in the mid-19th century. The pound was the dominant currency at the time, and transactions between the pound and dollar were executed via transatlantic cable.

A monthly economic report, that is released by Markit and is based on a survey of about 400 purchasing managers in China. A reading above 50 indicates expansion of the manufacturing sector and the economy in general, whereas a reading below 50 indicates contraction.

A price charting method that originated in Japan in the 18th century. A standard Candlestick chart contains a series of multiple individual candlestick data points. Colour schemes are used to illustrate the real bodies of the candles, which is the difference between a lower close than the open (red) and a higher close than the open (green).

The capacity utilization rate measures the proportion of a country's resources used by manufacturers, mines and utilities. A high reading is positive for the country's currency whereas a low reading is negative. This report is released by the Federal Reserve.

The Consumer Confidence Index (CCI) is a monthly release from the Conference Board, a non-profit business group that is highly regarded by investors and the Federal Reserve. CCI is a distinctive indicator, formed from survey results of more than 5,000 households and designed to gauge the relative financial health, spending power and overall confidence of the average American consumer.

A CFD is a financial derivative which allows traders to speculate on a number of assets without owning them. It is basically an agreement between an investor and an investment institution. When the agreement expires, the parties exchange the difference between the opening and the closing prices of a particular financial asset.

A technical analysis tool, similar to the concept of a trendline. At times prices fluctuate between two parallel lines, the basic trendline and the channel or return line. Channels may be used to trigger buy/sell signals and calculate price targets.

The Chicago Purchasing Managers' Index is a monthly survey where purchasing managers (in Illinois, Indiana and Michigan) are asked to rate employment, production, new orders, prices, supplier deliveries and inventories. A reading above 50 is bullish for the US Dollar while a reading below 50 is bearish. This report is released monthly by ISM-Chicago Inc.

Part of the MT4 Trading Platform that allows traders to receive live incoming prices, open and manage orders, perform technical analysis, write, back test and optimize trading robots, and develop indicators and scripts.

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living.

A US report that indicates the number of individuals on unemployment benefits. A high reading is negative for the US Dollar, whereas a low reading is positive. This report is released monthly by the US Department of Labour.

The principle of contrarian trading assumes that when the larger majority of traders agree on the direction of the market then they are usually wrong. A true contrarian will therefore trade in the opposite direction.

A US economic indicator used to measure inflation based on measurement of price movements of a representative shopping basket of goods and services, excluding food and energy. A high reading is positive for the country's currency whereas a low reading is bearish. Released monthly by the Bureau of Labour Statistics.

U.S. aggregate retail sales excluding automobile and gasoline sales, which are excluded due to their volatility. The figures are released monthly by the U.S. Department of Commerce about two weeks after the end of the reference month. As consumer spending accounts for more than two-thirds of the U.S. economy, the core retail sales data is an important indicator about the health of the overall economy.

Crude Oil Inventories is a weekly report that measures the change in Crude Oil stocks (i.e. barrels). It includes domestic and Customs-cleared foreign crude oil stocks held at refineries, in pipelines, in lease tanks and in transit to refineries. The report is released by the Energy Information Administration.

Digital currency in which encryption is used to regulate the generation of units of currency. It operates independently of the traditional banking system. Bitcoin, Ethereum and Litecoin are among the most popular cryptocurrencies.

Deflation is a contraction in the supply of circulated money within an economy, and therefore the opposite of inflation. In times of deflation, the purchasing power of currency and wages are higher than they otherwise would have been.

A financial instrument, traded on or off an exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement.

A trading account which is funded with virtual money, giving the trader an opportunity to explore the markets and test the trading platform they're using before investing real money in a live trading account.

An arrangement by which the owner of the account gives written power of attorney to someone else, usually the broker or a Commodity Trading Advisor, to buy and sell without prior approval of the account owner. Also referred to as a Managed Account.

A stock market index composed of 30 stocks of large American companies. It's based on Charles Dow's 1884 stock market average composed of nine railroad and two manufacturing companies. The index grew to include 30 stocks by the year 1928. It is used to gauge stock market activity and the country's economic health.

A stock market index composed of 30 stocks of large American companies. It's based on Charles Dow's 1884 stock market average composed of nine railroad and two manufacturing companies. The index grew to include 30 stocks by the year 1928. It is used to gauge stock market activity and the country's economic health.

An economic indicator released monthly by the Bureau of Census that reflects new orders placed with domestic manufacturers for delivery of factory hard goods (durable goods) in the near term or future. Durable goods orders come in two releases per month: the advance report on durable goods and the manufacturers' shipments, inventories and orders.

The Elliott Wave Theory is the theory named after Ralph Nelson Elliott, who concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves.

1) In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage. 2) A stock or any other security representing an ownership interest. This may be in a private company (not publicly traded), in which case it is called private equity.

An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange.

The Federal Reserve Bank is the central bank of the United States and arguably the most powerful financial institution in the world. The Federal Reserve Bank was founded by the U.S. Congress in 1913 to provide the nation with a safe, flexible, and stable monetary and financial system.

A popular tool used by technical analysts to identify potential support and resistance levels based on some key numbers. These numbers possess a number of interrelationships, such as the fact that any given number is approximately 1.618 times the preceding number.

It is a technical analysis tool attached from bottom to top in a rising market and from top to bottom in a declining market. The horizontal lines show the Fibonacci Retracement levels (ratios): 0.236, 0.382 and 0.618.

When an investor has a very specific price they want to carry out a transaction at, they place a Fill or Kill order - this means that if the order is not filled at the desired price, it is terminated, or killed.

A futures contract is a legal agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

An estimate of the Manufacturing Purchasing Managers' Index (PMI) for a country based on about 85% of total PMI survey responses each month. It is intended to provide an accurate advance indication of the final PMI data.

German Retail Sales measures the change in the total value of inflation-adjusted sales at the retail level, excluding automobiles and gas stations. It is the primary indicator of consumer spending, which accounts for the majority of economic activity. A higher than expected reading is considered positive/bullish for the EUR, while a lower than expected reading can be taken as negative/bearish for the EUR.

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well.

Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a country's residents. GNP is commonly calculated by taking the sum of personal consumption expenditures, private domestic investment, government expenditure, net exports, and any income earned by residents from overseas investments, minus income earned within the domestic economy by foreign residents.

The term "hawkish" refers to the tone of language that policy makers use when referring to inflation. For example, a hawkish statement implies that drastic measures may be taken to raise interest rates.

In technical analysis, a head and shoulders pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal. It consists of three tops and two bottoms. The highest top is known as the Head where the top to the left is known as the Left Shoulder and the top to the right is known as the Right Shoulder.

Housing starts are the number of new residential construction projects that have begun during any particular month. Housing start statistics are released on or around the 17th of each month by the U.S. Commerce Department. The report includes building permits, housing starts and housing completions data.

I

A technical indicator that is used to gauge momentum along with future areas of support and resistance. The Ichimoku indicator is comprised of five lines called the tenkan-sen, kijun-sen, senkou span A, senkou span B and chickou span. This indicator was developed so that a trader can gauge an asset's trend, momentum and support and resistance points without the need of any other technical indicator.

The International Monetary Fund, or IMF, promotes international financial stability and monetary cooperation. It also facilitates international trade, promotes employment, sustainable economic growth, and helps to reduce global poverty. The IMF is governed by and accountable to its 189 member countries.

Implied volatility is the estimated volatility of a security's price. In general, implied volatility increases when the market is bearish, when investors believe that the asset's price will decline over time, and decreases when the market is bullish, when investors believe that the price will rise over time.

A market index is an aggregate value produced by combining several stocks or other investment vehicles together and expressing their total values against a base value from a specific date. Market indexes are intended to represent an entire stock market and thus track the market's changes over time.

Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

In Time Cycles analysis, Intermediate Cycles last from several weeks to several months. Identification of Intermediate Cycles may be performed by measuring the time interval between the cycle's troughs (lows) on the X-axis of the price chart.

The International Monetary Fund, or IMF, promotes international financial stability and monetary cooperation. It also facilitates international trade, promotes employment, sustainable economic growth, and helps to reduce global poverty. The IMF is governed by and accountable to its 189 member countries.

A monthly survey in which purchasing managers are asked to rate business activity in the manufacturing sector and more specifically, production, employment, new orders, prices, supplier deliveries and inventories. A reading above 50 is considered a bullish signal for the US Dollar, while a reading below 50 is bearish. Released monthly by the Institute of Supply Management.

The Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers' Index (PMI) is a composite index calculated as an indicator of the overall economic condition for the non-manufacturing sector.

J

This is the theory that if the stock market ends higher in January, the rest of the year will also end higher. Conversely, if January ends on a low note, stock prices will be lower for the end of the year.

A survey done by the United States Bureau of Labour Statistics to help measure job vacancies. It collects data from employers including retailers, manufacturers and different offices each month. The JOLTS data is published monthly and by region and industry.

K

One of the longer cycles in Time Cycle Analysis, discovered by the Russian Economist Nikolai D. Kondratieff. He supported that a cycle of approximately 54 years is present in prices and many areas of economic activities.

L

Labour productivity is a measure of economic growth within a country. Labour productivity measures the amount of goods and services produced by one hour of labour specifically, labour productivity measures the amount of real gross domestic product (GDP) produced by an hour of labour. Growth in labour productivity depends on three main factors: investment and saving in physical capital, new technology, and human capital.

Leverage in trading simply refers to the ability to increase the size of your trade or investment by using credit from a broker. When trading using leverage, you are effectively borrowing from your broker, while the funds in your account act as collateral. The use of leverage in trading magnifies both gains and losses. Leverage is expressed as a ratio form, so if it is 1:100 for example, a trader's buying power is magnified by 100 times.

A limit order is a take-profit order to buy or sell a set amount of a financial instrument at a specified price or better because a limit order is not a market order, it may not be executed if the price set by the investor cannot be met during the period of time in which the order is left open.

A Technical Analysis tool used for trend identification for a set of prices under a period of study. It is attached on the chart by selecting the first price representing the beginning of the trend and then dragging the mouse to the second price in the direction of the trend.

Market liquidity refers to the extent to which a market, such as a country's stock market, allows assets to be bought and sold at stable prices. Cash is considered the most liquid asset, while real estate, fine art and collectibles are all relatively illiquid.

M

A set minimum amount (per outstanding futures contract) that a customer must maintain in his margin account to retain any open positions. Maintenance margin is also referred to as "minimum maintenance" or "maintenance requirement."

A margin call is a broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. This is a notification which alerts you that you need to deposit more money in your trading account so there can be sufficient margin to keep existing positions open.

The study economic activity as it applies to individual firms or well-defined small groups of individual or economics sectors. Microeconomics shows how and why different goods have different values, how individuals make more efficient or more productive decisions, and how individuals best coordinate and cooperate with one another.

Moving averages come in various forms, but their underlying purpose remains the same: to help technical traders track the trends of financial assets by smoothing out the day-to-day price fluctuations, or noise.

Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.

N

A global electronic marketplace for buying and selling securities, as well as the benchmark index for U.S. technology stocks. Nasdaq was created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and commenced operations on February 8, 1971.

An economic indicator that measures sales of newly built homes. Released by the U.S. Department of Commerce's Census Bureau, it includes both quantity and price statistics. It is considered to be a lagging indicator of demand in the market and to affect mortgage rates.

The New York Stock Exchange (NYSE) is a stock exchange based in New York City that is considered the largest equities-based exchange in the world, based on total market capitalization of its listed securities. Formerly run as a private organization, the NYSE became a public entity in 2005 following the acquisition of electronic trading exchange Archipelago.

Nonfarm payroll is a term used in the U.S. to refer to any job with the exception of farm work, unincorporated self-employment, and employment by private households, the military and intelligence agencies. Proprietors are also excluded. The U.S. Bureau of Labour Statistics releases closely-followed monthly data on nonfarm payrolls as part of its Employment Situation Report. The headline figure, the change in the total number of nonfarm payrolls compared to the previous month, is used as a gauge of economic health.

Nikkei is short for Japan's Nikkei 225 Stock Average, the leading and most-respected index of Japanese stocks. It is a price-weighted index comprised of Japan's top 225 blue-chip companies traded on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average Index in the United States.

O

The Organization of Petroleum Exporting Countries (OPEC) is a group consisting of 12 of the world's major oil-exporting nations. OPEC was founded in 1960 to coordinate the petroleum policies of its members, and to provide member states with technical and economic aid. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.

An oscillator is a technical analysis tool that is banded between two extreme values and built with the results from a trend indicator for discovering short-term overbought or oversold conditions. As the value of the oscillator approaches the upper extreme value, the asset is deemed to be overbought, and as it approaches the lower extreme, it is deemed to be oversold.

When the market rises too far oscillators will reflect that rise with extreme high readings above the middle/equilibrium line, hence identifying overbought conditions. An oscillator at extreme high conditions can be an alert for a reversal. Oscillators usually give false signals in the beginning of a trend as they move too fast in the overbought area.

P

A pip is the smallest price move that a given exchange rate makes based on market convention. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point for most pairs, this is the equivalent of 1/100 of 1%, or one basis point. For example, the smallest move that the USD/CAD currency pair can make is $0.0001, or one basis point.

The mathematical calculation formula used to determine the support or resistance ranges in given time period. These formulas can be used to calculate intraday, daily, weekly, monthly, or quarterly range.

Pump and dump schemes are a type of market manipulation in which an asset is bought up in order to raise its price. The rise in value attracts other traders wanting to benefit from the move, who also buy in, raising the price even more. Eventually the perpetrators of the scheme dump their holdings at the new inflated price.

Q

Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

The relative strength index (RSI) is a momentum indicator developed by noted technical analyst Welles Wilder that compares the magnitude of recent gains and losses over a specified time period to measure speed and change of price movements of a security. It is primarily used to attempt to identify overbought or oversold conditions in the trading of an asset.

Resistance or resistance level is a price point on a bar chart for a security in which upward price movement is impeded by an overwhelming level of supply for the security that accumulates at a particular price level. Resistance levels are characteristically found at the upper levels of range bound markets

In the trading world, risk management is the process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions. Essentially, risk management occurs any time an investor or fund manager analyses and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given his investment objectives and risk tolerance.

S

A security is a fungible, negotiable financial instrument that holds some type of monetary value. For BDSwiss traders, the term security is used to refer to an ownership position in a publicly-traded corporation (via stocks.

The last price paid for a futures contract on any trading day. Settlement prices are used to determine open trade equity, margin calls and invoice prices for deliveries. Also referred to as Closing Price.

The candle that forms at tops of markets where the shadow is at least twice the length of the real body and the real body forms near the low for the session with little or no shadow at the bottom. This candle resembles an inverted hammer.

Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed. Slippage often occurs during periods of higher volatility when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade.

The stochastic oscillator is a momentum indicator comparing the closing price of a security to the range of its prices over a certain period of time. The sensitivity of the oscillator to market movements is reducible by adjusting that time period or by taking a moving average of the result.

An order designed to limit an investor's loss by buying (or selling) a financial instrument once its price sails above (or falls below) a certain stop price. These orders are placed to limit loss on a position.

T

Technical analysis is a trading tool employed to evaluate securities and attempt to forecast their future movement by analysing statistics gathered from trading activity, such as price movement and volume. Unlike fundamental analysts who attempt to evaluate a security's intrinsic value, technical analysts focus on charts of price movement and various analytical tools to evaluate a security's strength or weakness and forecast future price changes.

A candlestick pattern consisting of three candles that close at their highs and can indicate a continued advance. This pattern is a reliable indication that prices are moving higher, especially if they develop after a longer period of consolidation at a bottom opposite of three crow's formation.

V

A measure of the rate of fluctuation of the price of a financial instrument over a period of time. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.